April 29--When Kristi Tanner traveled to Russia in 2013 to attend a plant opening by a Chinese company, she took along a picture book about Ohio and a letter from the state's governor to hand to its chairman.
Through a translator, Tanner, a managing director at JobsOhio, told the Chinese executive how Gov. John Kasich hoped the company would choose Ohio for future growth.
The gesture, said Tanner, a managing director at JobsOhio, helped her schedule a follow up meeting in China and ultimately helped Ohio win a pledge of 1,500 jobs from Fuyao Glass America in 2014. Fuyao is investing $360 million in an automotive glass manufacturing facility in Moraine, Ohio, that is to start test production this summer.
Tanner said the speed at which she was able to maneuver was a reason why JobsOhio, the state's nonprofit economic development arm, has been successful. "Had we hesitated at all, we wouldn't have made it," she said.
Last year, JobsOhio worked on 286 projects with companies pledging to create 21,377 jobs, retain 52,140 people and invest $6.1 billion in the state, according to JobsOhio's annual report. At 5.1 percent, Ohio's unemployment rate is nearly 4 percentage points lower than it was in 2011 and slightly lower than it was before the recession.
These are the kind of results Illinois hopes to replicate. It wants to make its economic development arm into a nonprofit that would create "a more dynamic, more energized culture that's consistent with what we've seen in other states," said Jim Schultz, director of the Department of Commerce and Economic Opportunity.
"We are not competitive," Schultz recently told lawmakers at a brief hearing on a bill that would create the nonprofit. He said he wants to lower the cost of attracting companies and recoup about 250,000 jobs Illinois has lost since early 2008.
If Illinois adopts the measure, it would join at least nine states including Indiana, Wisconsin and Ohio that have moved in recent years to privatize some or all of their economic development efforts. Proponents of the move say it allows state workers to quickly respond when lucrative jobs and opportunities are on the table, cutting bureaucracy and improving results.
But critics say it is unclear how private development arms are superior to public counterparts. Moreover, they worry that going private will make it more difficult for people to track spending of state tax money because usually less information on tax incentives and grants is available. They say the lack of transparency in some states already has led to the misuse of funds.
"One of the problems with this (trend) is that there is no evidence that says a private system is any better than that of a public system," said Jeff Finkle, president of the International Economic Development Council, a professional group based in Washington. "I don't understand what gets achieved by doing this."
In response to concerns, the proposed Illinois nonprofit would be required to post on its website copies of the minutes of board meetings and final grant agreements as well as the amount of tax incentives provided to companies. But the proposed nonprofit would be a contractor of DCEO, meaning requests for additional information could be at least partially shielded from open-records laws.
Relying on Freedom of Information requests, the Tribune has reported that Illinois had pledged nearly $1 billion in corporate income tax credits since 1999, and that some companies brokered deals valued at millions of dollars even as they laid off hundreds of workers.
Maryam Judar, a lawyer at Citizen Advocacy Center, said she's doubtful complete records would be accessible should the state's economic development arm become a nonprofit.
"It's bad for the public and for government watchdogging and for making sure that taxpayer dollars are being spent efficiently, and that tax incentives, otherwise known as corporate welfare, are allocated in a fair manner and in an appropriate manner," Judar said.
The best way to ensure transparency, Judar said, would be for lawmakers to amend the public records law to include nonprofit economic development entities. The current law only applies to public bodies.
Ohio has had its issues with questionable spending. The Columbus Dispatch reported in 2013 that Ohio had quietly awarded JobsOhio $5.3 million in state grants to use without lawmakers' approval.
Amid questions over JobsOhio's use of public money, the state auditor issued a subpoena for its financial records. JobsOhio eventually returned the grant money and released some information about its first year of operation but later won a legal exemption from further review of its finances.
JobsOhio, created in 2011, used private money to lease the state's wholesale liquor business for 25 years. Profits from that enterprise fund its economic development efforts.
John Minor, JobsOhio president and chief executive, said a private firm reviews JobsOhio's finances quarterly and that some financial information is made public on JobsOhio's website.
Other public-private development agencies have stumbled. A 2014 state audit of Wisconsin's public-private development agency, for instance, found it did not follow state law when making awards and failed to track payments on loans. It also found staff members misused credit cards to buy tickets to football games and iTunes gift cards.
Wisconsin is revamping its economic development arm, merging it with the Wisconsin Housing and Economic Development Authority. The new agency will receive public and private funds and will have a board made up of private sector appointees with no elected officials.
Wisconsin's development arm notes that it has "significantly reduced" the time required to provide grants and loans and that it has broadened its overseas presence to 54 countries from four.
"Overall, Governor (Scott) Walker's plan is to reform government by merging state agencies to be more effective, more efficient, and more accountable," Laurel Patrick, a Walker spokeswoman, wrote in an email.
Indiana created a quasi-public agency in 2005, with a nonprofit arm that secures money from the private sector. Officials said such an approach is more efficient.
Last year, 285 companies committed to hiring more than 25,000 people and investing $4.38 billion in the state. In exchange, companies were promised incentives, including more than $232 million in corporate income tax credits, according to the website.
Eric Shields, vice president of policy and strategic initiatives at the Indiana Economic Development Corp., said the state's former commerce department made just a few dozen deals.
"Prior to IEDC those numbers were just a fraction at best," Shields said. He added, "This structure allowed us to shed some of the bureaucratic red tape that you get with a lot of state governments."
For example, he said, his office calls back companies immediately and is able to quickly put together teams to respond to inquires.
Part of the drawback with the department of commerce, Shields said, was it was an umbrella agency with 125 employees whose responsibilities were scattered among tourism, agriculture and even recycling.
Now, it has 60 to 70 people focused solely on creating jobs in Indiana. Shields also noted that some of its employees were poached from the public sector, lured by competitive salaries the department of commerce couldn't offer.
But Indiana, too, has had its results questioned by both government watchdogs and the media.
In 2012 an Indiana television station revealed that as many as 40 percent of the more than 100,000 jobs said to have been created through the efforts of the state's economic development arm had not materialized. A year later, Indiana began disclosing some details of deals in the spirit of trying to be more transparent.
Illinois lawmakers have considered privatizing economic development for several years.
A similar idea was introduced in 2013, amid criticism over the state development office brokering special deals allowing Motorola Mobility and Sears Holdings to keep their employees' tax withholdings instead of forwarding the money to the state. The proposal died after the head of the department voiced concerns about transparency and dozens of companies rose in support of the agency.
Mark Muro, policy director of the metropolitan policy program at the Brookings Institution, said privatizing an economic development agency doesn't necessarily mean it will be successful. Muro said elected officials often are to blame, pushing headline-grabbing deals to show they are trying to create jobs.
"Governors live in fear of losing a big plant competition and tend to throw subsidies at relocations which remain a small part of regional job growth," Muro said.
To keep Motorola Mobility in Illinois, the state offered more than $100 million in incentives. In 2013, two companies that threatened to leave the state were offered special incentives totaling $77 million. Among them was ag giant Archer Daniels Midland, which eventually moved its global headquarters to Chicago despite not getting the special deal it sought.
To move the dial on economic growth, Muro said, economic development officials should be working with existing industry clusters to boost regional growth. Success, he added, comes from cultivating and expanding existing industries and creating a partnership with the private sector to ramp up innovation and jobs skills.
Tribune reporter Kim Geiger contributed.
acancino@TribPub.com
Twitter WriterAlejandra
